True Ancillary Income

Oct 19, 2006

Every month, no matter which trade publication you pick up, you will undoubtedly find another article on ancillary income for the self-storage facility. Why is so much written on the topic? The answer is both simple and complex: income.

All of us derive our revenues from only two cash streams: rent and its associated administration and late fees; and ancillary income. Most of us sell boxes, tape, locks and other moving supplies.

To keep pace with rising operating expenses, were always searching for new ways to get cash flowing into the till. Along with records and boat/RV storage, there are car washes, wine storage, cell towers, notary services, private mailbox rentals, private day offices, local moving services, key cutting, e-Bay drop-off stores and propane filling. Lets face it, if it can be sold, its probably being sold at a storage facility somewhere.

However, I believe several items on this list dont qualify as ancillary income because they require significant capital expenses. Examples are car washes, wine storage, mobile storage, moving services and records storage (if file retrieval is involved). For all practical purposes, these businesses are separate operations. In fact, you may want to review statues in your state to see if its legal to combine them with self-storage on your site.

Truckin in Dollars

Lets look at true ancillary income sourcesthose that yield the most profit with the least capital expenditure. The best source Ive found is truck rental. Income potential can range from $20,000 to more than $200,000 per year in commissions, with absolutely zero in capital outlay. Granted, to reach higher revenues, the operator may have additional increases in operating expenses.

Weve operated truck rentals with most of the dealerships out there: Budget (formerly Ryder), U-Haul, Penske, as well as privately owned trucks or leased ones from On The Move. They all offer maintenancethe difference is how much you want. The big three assume general maintenance on the trucks. Your daily duty is fluid checks and fills, but you dont have to worry about inspections and licensing. If you own or lease your own truck, youll obviously have more responsibility.

Another advantage in working with the big three is significant commissions from one-way truck rentals. One-ways are customers who rent a truck from you and drive it across the country to their new home. If you owned the truck, you couldnt provide the serviceunless you wanted to run up frequent-flier miles.

One-ways also help build tenancy. When people move into our communities, they drop off the trucks at our storage facilities, where we can pitch them storage. And when they reserve the truck for a one-way, we have the chance to sell them boxes and moving supplies. Its a double dose of ancillary income!

Manning Trucks

Trucks should not be a significant burden on operations or managers until rentals reach $100,000 to $150,000 per year. At this point, the manager most likely would need additional help. Phone traffic is the most time consuming, depending on your profit goals. Some of the big three want the facility to follow up and close the prospect. Others will do it for you, or ask you to quote the rate and book it right away.

You wont always have a truck for every customer, a negative factor thats hard to accept. Most rental companies have a commission-split program if you have to send the customer to another location to pick up the truck. I recommend you pick up the truck yourself so you can pocket the entire rental.

Another advantage of trucks is that commercial businesses will rent them for local use. These are usually repeat customers. Not only do they rent regularly, but they provide you with an inside track on companies that may need extra storage space.

Tower Power

Cell towers now provide some operators with significant ancillary income. If you have the right property, you ought to explore this kind of lease. No costs are involved and any tower-construction fees are the burden of the cellular carrier. Ideally, this option should be considered during site planning because the carrier may need the tower in a certain area for access.

The beauty of cell towers is companies pay monthly on leases that could be decades long. This is the easiest income source for an operator; invest a few hours in lease negotiation, and enjoy a yearly income as high as $50,000.

Private mailboxes, day offices and conference rooms are more of a value-added benefit for your tenants than a source of revenue. Some facilities benefit from a direct revenue stream, but most do it to one up competitors.

Boxes and moving supplies are a given ancillary sales item in our industry. Every facility, no matter how small, should stock at least a minimal number. The trend is to increase the office space and call it the office/retail area.

Make sure your box inventory is right out there to be seen and touched by all customers. Make them walk around it to get to your rental counteryoull sell more. About 3 percent to 5 percent of your income will stem from selling boxes and moving supplies.

We cant end without invoking McDonalds famed marketing slogan, Would you like fries with that? If you really want to increase sales, remember that line. Your best bet is to ask customers if they need boxes when they inquire about storage. That also goes for truck rentals, propane refills, private mail boxes, and so on. You cant make the sale if you dont ask for it!

Scott Harris is the president of Dana Management Group and owner of Movin On Storage Centers. The company provides consulting services, from facility startups to third-party operational contract management, as well as feasibility studies and facility audits. For more information, visit www.danamanagement.com; e-mail [email protected].